The central banks are riding on fundamental numbers to adjust their policy tools. Now since Europe is showing ray of hope and US turning down will offer former central bank will not alter or extend its easing policy for now while later would continue thus may push do dollar down against Euro and other currencies, says Jamal Mecklai.
Mecklai graph of the day: Convergence in US vs EU & China PMI
The manufacturing activity globally has faced an evident slowdown which has gripped the world affecting the economies is slowing or decelerating. US saw the steepest downfall by 17.78 percent with China being the second largest economy faced a slowdown of 12.18 percent and Euro Zone by 25.42 percent since January 2010. In recent quarters, China and Euro Zone have been able to recover indicating signs of stabilization while in US have been volatile.
US manufacturing saw a disappointing fall from 50 in April to a 49 in May reflected declines in production, new orders and input prices while job index stagnated. These suggest that the economy is losing its momentum during the second quarter as it has been dragged by fiscal measures introduced at the beginning of year. Once the impact of fiscal consolidation is diminished this would give some acceleration to drive the economy and sector higher. Euro zone manufacturing PMI rose to 48.3, from 47.8 in the preceding month indicating the outlook of Europe has started showings signs of stabilizing with improvements seen in Spain, France, Italy, and Germany went up by 3.4, 2.0, 1.8 and 1.3 points. This has provided respite to ECB chief who might be optimistic in his upcoming monetary policy.
The central banks are riding on fundamental numbers to adjust their policy tools. Now since Europe is showing ray of hope and US turning down will offer former central bank will not alter or extend its easing policy for now while later would continue thus may push do dollar down against Euro and other currencies.
Below graph depicts PMI numbers of China, Euro Zone and US since Jan 2010.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.